What does "subrogation" allow an insurer to do?

Subrogation is a fundamental principle in insurance that allows an insurer to pursue recovery of claim costs from a third party that is responsible for causing a loss. When an insurer pays for a policyholder's claim, it often steps into the shoes of the insured and acquires the right to seek reimbursement from the party at fault. This process helps insurers recover some of their financial outlay, ultimately keeping premium costs lower for all policyholders and ensuring that the responsible party is held accountable for their actions.

The other options do not correctly reflect the definition or purpose of subrogation. Preventing policyholders from making claims would contradict the role of insurance, which is to provide financial protection. Adjusting premiums after a claim could be a separate process not directly tied to subrogation, and negotiating with beneficiaries for settlements typically involves direct claim handling rather than an action resulting from subrogation. Thus, the correct choice accurately captures the essential function of subrogation in the insurance process.